Laidlaw & Co. Lawyer Warned of Sanctions in Black Stockbroker Employment Retaliation lawsuit

An attorney for Laidlaw & Co was warned he could be sanctioned by SDNY’s Judge Woods today in an employment relationation lawsuit involving an African American stockbroker, George Calhoun, who sued the New York-based broker dealer for racial discrimination and having to work in a hostile environment. The attorney, Christopher Milazzo, of CMP LLP, and his partner Ross Carmel both represent Laidlaw and were former lawyers at Sichenzia Ross Ference. Milazzo was trying to argue to throw out the retaliation claim before a December court ordered mediation hearing because the lawsuit says the retaliation happen after Calhoun was an employee at Laidlaw. But after Judge Woods heard Milazzo argue the incorrect legal standard of employment retaliation vs. discrimination, according to New York state and NYC law, he spanked attorney Milazzo with a strong verbal warning that he would have no problem using Rule 11 and issue sanctions for filing a brief with a frivolous argument not based on any actual legal foundation or case law. This is the second time Judge Woods has questioned Milazzo on arguments for Laidlaw where he could not site a single case to support what appears to be his clients version of mickey mouse law.

Calhoun initially went through pre-lawsuit litigation against Laidlaw last year, via mediation, which was not public that detailed horrendous racial comments, acts and behavior by multiple Laidlaw executives which include the President’s brother, according to people familiar with the event. Laidlaw folded and settled after their insurance heard what had happen to Calhoun, according to people familiar with the situation. Laidlaw agreed to give a whopping $650,000, with at least a third going to his lawyers at New York-based Nesenoff & Miltenberg llp, for alleged employment discrimination at Laidlaw. One of the actions previously reported by this journalist involved stockbroker manager Todd Cirella sending a text of a black man being hanged in a text conversation about Calhoun, this text was mentioned as coming out in discovery in a public hearing held last month for this case, according to a transcript obtained by this journalist.

Laidlaw’s president, Matt Eitner, has been front and center in the discrimination claims by Laidlaw staff and has been accused of not supervising or taking appropriate management actions when he became aware of the racist behavior and complaints of his staff. Eitner is also currently being investigated by FINRA for supervising securities fraud at Laidlaw, according to FINRA records, which was first reported by this journalist. According to multiple people who have spoken with Eitner after the discrimination claims became public he is deeply offended that he could be called or considered a racist for allowing the alleged behavior at his firm continue for years. Eitner is not a named defendant in the retaliation case. Retaliation claims are filed usually against a company.

After the discrimination claims settled Laidlaw went and withheld $125,000 from Calhoun’s settlement check after they had told Calhoun’s counsel they wouldn’t do that, according to the new lawsuit for retaliation and breach of contract filed in New York federal court this summer. Laidlaw claimed the $125k was taken out for a settlement with a customer who complained about being sold unsuitable investments but at a court hearing last month attorney Milazzo admitted no such settlement has even taken place yet. Additionally, there is no customer complaint filed with FINRA yet against Calhoun as is the customary practice, according to Broker Check. It’s these actions that Judge Woods grilled Milazzo on in justifying where in New York case law is this legal to withhold money from a settlement, especially after you said you wouldn’t do that.

The court transcript reads like Judge Woods sees the clear breach of contract by withholding the money and warned attorney Milazzo that discovery could be justified to show how these actions by Laidlaw aren’t retaliation for George Calhoun complaining about racism in the workplace.

Malizzo’s current law firm, where he is a named partner with former SRF LLP lawyers, braggs about the firm being ‘aggressive’ lawyers for securities litigation and business disputes. But in Calhoun’s new lawsuit it appears Judge Woods isn’t having any of their legal tactics or will allow their client to make stuff up.

Additionally, Malizzo and Carmel’s former law partner Peter DiChiara was charged by the SEC in September for assisting in a microcap stock scheme. DiChaira settled the charges with the SEC.

SRF llp, where attorney Malizzo worked for a decade, is the law firm that was sued for malpractice in the Barry Honig pump and dump scheme and recently paid out a settlement to one of the SEC’s victim companies for alleged bad legal practices by its former partner Harvey Kesner. SRF also reps Laidlaw in FINRA complaints and advises the broker dealer on securities law.

Today’s hearing ended with Judge Woods again encouraging Laidlaw to settle with Calhoun and not waste legal fees on this dispute. He specially said he likes to see money go to the aggrieved instead of the lawyers. That’s likely because Calhoun’s lawyers have a broad legal standard in their case because of New York City Human Rights law. All they have to do to prove the retaliation claim is show Laidlaw engaged in conduct that is reasonably likely to deter a person from making a discrimination claim.

Calhoun’s attornies, Nicolas Lewis and Gabrielle Vinci, wrote in a response letter to Judge Woods about Laidlaw trying to throw out the retaliation claim, “A reasonable jury could certainly find that the unilateral withholding of a substantial sum of money from an agreed upon settlement payout for reasons proven false by Defendant’s own statements would persuade a reasonable employee from engaging in the protected conduct that led Plaintiff to this point, i.e. would deter a reasonable employee from making a claim of discrimination.”

NYC and NY state law will also allow Calhoun to get a bigger payout if the retaliation claim survives. There have been some cases where an extra six figures was awarded for employment retaliation which means Laidlaw could be faced with paying Calhoun double what they withheld.

Editors Note: Below is a copy of a court transcript which shows Judge Woods grilling Laidlaw’s lawyers on their lack of court cases to support their legal arguments and also mentions what documented evidence of racial discrimination is likely to come out if this case moves to discovery. It’s a fun read for legal nerds.

Attornies Milazzo and Carmel did not respond for comment. Matt Eitner at Laidlaw did not respond to an email with questions about the ethics and legal issues in the Calhoun case.

Calhoun Letter to Court 11.1.20 Laidlaw Retaliation Case by Teri Buhl on Scribd

Barry Honig allegedly set up Undisclosed promotion in Majesco to influence Stock price: $PTE

In September 2015 Barry Honig arranged for a stock list promotor to write favorable analysis on a company called Majesco ($COOL) and distribute it to thousands of main street investors, according to people interviewed by this reporter and familiar with the transaction. To allegedly get around SEC disclosure rules Honig promised to pay the promoter on their next deal if the person did this one for free and on September 15 2015 that’s exactly what happen, according to a person involved in the transaction. This was just two weeks before Barry C. Honig and and his young protegee John Stetson became CEO and CFO of the company. The promoter was eventually paid by Honig in other deals which included Honig making a phone call to explain how a third party would be making the payment, according to two people familiar with the transactions.

At the time of the undisclosed promotion in Majesco Honig and his associates which included Stetson, Michael Brauser, Philip Frost and others held cheap shares and warrants in the company via an investment called a private placement. This same group as been accused of trading as an undisclosed group of affiliates by the Securities and Exchange Commission in other stocks and the predecessor of $COOL, PolarityTE $PTE, disclosed the SEC had began an investigation into the company in March 2019.

Honig is notoriously fearful of people he works with wearing a wire according to three people who have worked with him because he says the FBI has been trying to catch him for years. He often communicates on the phone but preferable in person or he sends messages through others like John Stetson. But in September 2015 he apparently got sloppy.

Three days after the promotion ran on September 18, 2015 Honig sent a private electronic communication, reviewed by this reporter, that referenced to the price of $COOL jumping up and stated it was a short the other day. This reporter has previously reported how Honig worked with his cousin Hunter Adams of to short the stock of companies he was also invested in via private placements unbeknownst to the companies that counted on his financial support.

The hint of undisclosed promotions that influenced the price of Majesco stock was first reported by journalist Chris Carey at in 2018.

With Honig and Stetson running the company Majesco made a bold face move in January 2016 to issue a $10 million cash dividend to all shareholders as of January 14, 2016 while the company was struggling to be profitable. Around January 20th Honig Michael Brauser and others now had big money checks in their hands basically paying them back for their early private placement with a huge gain and they weren’t quite with their peers about the size of profit they had just made, according to people who spoke with this reporter.

Seven months after the Honig led promotion in April 2016, attorney Harvey Kesner wrote a letter to the SEC on behalf of the company stating while Honig and Stetson had made early investments in the company that were going to be converted to free trading stock the company viewed them as independent when they made the investments. Because the company was NASDAQ listed independence rules are important to keeping the company in compliance with a NASDAQ listing. There are also issues of undisclosed affiliation which the SEC was looking it.

At the time of the letter Kesner was a partner at New York law firm Sichenzia Ross Friedman Ference LLP. This is the same firm that allegedly asked Kesner to leave two years latter around the same time Barry Honig was charged for securities fraud by the SEC in 2018. Kesner and the law firm recently settled a malpractice suit for their alleged role with one of the victim companies in the SEC securities fraud suit filed against Kesner’s clients. The amount of the settlement was sealed but recent court filings in the Mabvax bankruptcy show the settlement was for seven figures.

Majesco eventually did a merger and switched to being a biopharma company called PolarityTE who claimed to have a FDA registered product called SkinTE. Those claims have been refuted by short sellers and are subject to currently civil litigation by shareholders.

It was John Stetson a graduate of the University of Penn who brought Ed Swanson of PolarityTE, another U Penn guy who went school with Stetson, to the attention of Barry Honig with an alleged plan to effect a merger with a group of executives willing to allegedly put forward false and misleading information about the company which influenced its stock price, according to people who spoke to this reporter and are familiar with team Honig and the transaction. The friendly CEO became a Dr. named Denver Lough.

Honig also had an affiliate of his, Edward Karr on the board. Karr has been an executives or board member in at least six public companies Honig invested in which included: Pershing Gold, Dataram, Levon Resources, PositiveID Corp, Majesco, California Gold, Exactus. Ed Karr has been the chairman and CEO of U.S. Gold this year another alleged Honig pump and dump. According to a person who gave testimony to the FBI in the Team Honig case Karr is a person of interest in the DOJ investigation.

Similar allegations of Team Honig influence and control of PolarityTE are currently in front of a Utah federal judge in the shareholder class action lawsuit ,which is waiting on the judge to rule on the motion to dismiss and allow discovery to move forward. Honig is not a named defendant in the lawsuit; instead shareholders are trying to hold his right hand guy John Stetson liable and the company’s last CEO Denver Lough.

Honig, Stetson and the rest of his crew have all settled with the SEC and everyone but Philip Frost got penny stock bans. A lawyer for Frost pointed out in a court hearing this month, attended by the reporter, the SEC case defendants who accepted penny stock bans implies scienter, which means they executed the illegal acts and securities violations with intent. But the in the SEC settlements the regulator allowed Honig, Bruaser, Grossman to keep their $PTE stock. Additionally, in 2020 the company made an announcement that the SEC sent them communication that their investigation is over. This statement is somewhat misleading as the SEC communication typically says there is a rule they have to inform you we are not going to charge you now but we could in the future.

Additionally, as previously reported by this reporter and confirmed by the SEC’s Nancy Brown, the San Francisco DOJ has an ongoing investigation into Team Honig. According to discovery in the SEC case against Honig it appears Honig is now working with the DOJ to cooperate and Michael Brauser’s lawyer has admitted at a court hearing to tolling agreements signed by some of Honig’s crew. The SEC also told Judge Ramos they are investing another securities fraud scheme by this group that was executed after Honig’s crew was charged by the SEC. Honig is still going to have to litigate how much he will pay in fines and restitution along with an llc that John Stetson controlled on paper but Honig was the major investor in.

According to a people who have reviewed the amount of money Honig holds in his bank accounts he is a triple digit millionaire.

Barry Honig did not respond to emails sent for comment to this story. One of his many lawyers did write a letter threatening litigation today if I reported he paid for a promotion but did not deny the statements. Honig has previously sued this reporter for being first to disclose he was under SEC investigation based on documented evidence. Honig eventually dropped that litigation with prejudice and the SEC charged him for what I reported he was doing the same year. Honig’s father Alan Honig now has stock positions he previously held in his name.

John Stetson is currently working on a Pizza franchise he invested in with Mark Groussman called Stoner’s Pizza.

Barry Honig’s law firm SRF llp pays out in Malpractice Settlement : $MBVX

Attorney Harvey Kesner and his former law firm Sichenzia Ross Ference LLP have agreed to payoff MabVax Therapeutics for Kesner’s alleged role in committing malpractice tied to a securities fraud pump and dump scheme led by his client Barry C. Honig. MabVax’s bankruptcy judge approved the settlement on September 15 because it was an amount that benefited Mabvax debtors, according to court filings. As part of the lawsuit settlement the amount of the payout to MabVax is sealed and it’s unclear how much attorney Kesner had to pay out of pocket or how much was paid by the law firm’s malpractice insurance. Kesner fought the case in Southern California District Court for more than a year but after mediation this summer his old firm appears to have finally folded. Since the case didn’t go to trial no one admitted guilt.

So far Kesner has retained his law license in New York regardless of his role representing the Honig cartel who have mainly settled securities fraud charges with the SEC. While Kesner’s name often appears in SEC subpoenas the SEC has not charged him in the Honig case although an ongoing criminal investigation is continuing led by the Northern California DOJ.

MabVax is a victim company in the Securities and Exchange Commission ongoing enforcement case against Honig and a group of men who helped execute pump and dump schemes and traded as a group of undisclosed affiliates to control the price of stocks for over a decade. Ten days after Kesner singed his malpractice settlement with MabVax the company filed an amended complaint against Honig and others who worked with him, in California State court, with even more details of how attorney Kesner allegedly assisted in Honig’s scheme.

Mabvax lawyers at Baker Botts wrote, “Defendants (Team Honig), Sichenzia, and Kesner, actively concealed their group status from MabVax.” And in a motion to dismiss hearing for Honig this summer Mabvax attorney Tania Rice, of Baker Botts, told the court Harvey Kesner in his role as attorney was “part of the fraudulent scheme”. Baker Botts has also stated in legal documents that they found through an internal investigation that in 2016 that Kesner advised MabVax to give misleading information to a regulator who came questioning about trades and investments in MabVax. Additionally, Kesner had stock in MabVax via his obscure private llcs Paradox Capital and Darwin, unbeknownst to MabVax. MabVax has accused Kesner of using those llcs to trade as an undisclosed affiliate with Honig. The group allegedly secretly owned a total of 53.95% of Mabvax by 2018.

To retaliate against MabVax for testifying for the SEC and the DOJ, Honig has personally sued the MabVax executives, David Hansen and Greg Hanson, in July in the Southern District of New York with a claim that he was falsely induced to invest. Honig says he wouldn’t have continued to invest in MabVax in 2018 if Hanson and Hansen had told Honig the SEC was investigated him. The problem is Honig leaves out of his lawsuit a fact pattern that could show it would be near impossible for him not to know what the SEC was focusing on in their investigation because his own attorney, Harvey Kesner, was the same person who was initially working for MabVax to answer the SEC investigative questions. The assumption could be of course Kesner told Honig what the SEC was asking MabVax about his investments which would be a conflict of interest for Kesner to disclose. Additionally, according to two people involved in the SEC case who worked directly with Honig, he would often accuses people of wearing a wire when they met with him and pat them down, because Honig knew the government has been after him for years.

Hansen and Henson said in their motion to dismiss, filed September 11, that Honig’s absurd legal logic shows this case is really just a public move to show others if you testify against him he will spend big dollars filing frivolous lawsuits against you to hurt your wallet.

Kesner has tried to make a similar move by suing Baker Botts, MabVax’s attorney, for allegedly trying to extort money from him ,in the form of a malpractice settlement, after they found Kesner’s alleged malpractice misconduct in their internal investigation of MabVax. That case was thrown out of the Southern District of New York and Kesner was sanctioned $1,000. It was moved to Southern California district court where Baker Botts is waiting on a judge’s decision to force Kesner to pay all their legal cost because via California anti-slaap laws they say he filed a bully lawsuit.

SRF LLP partner Marc Ross did not respond for comment about the malpractice settlement and would not expand on why Kesner’s LinkedIn profile still says he works at the firm after they removed his name as a named partner in September 2018. Language in the malpractice settlement says MabVax nor its attorney can speak to the media about the settlement or help any additional third parties who also might want to sue Kesner or his former law firm.

Honig is still waiting to settle how much of a monetary fine and disgorgement he will pay in the SEC securities fraud lawsuit. While he agreed to a penny stock ban some of his prior stock positions are now being traded in his wife, Rene, and father Alan Honig name. Court documents show he also has met with the FBI and given a proffer statement and is cooperating with DOJ against others in the scheme.

Attorney Harvey Kesner sanctioned in Frivolous Lawsuit relating to MabVax: $MBVX

UPDATE July 17,2020: Harvey Kesner has dismissed his $35 million lawsuit against law firm Baker Botts and attorney Johnathan Shapiro for allegedly getting him fired when they told his former law partners that among other things they found attorney Kesner had assisted in a coverup for MabVax in a regulator investigation. Kesner’s attorney is Steven S. Biss who is known for his Rep. Devin Nunes lawsuits against Twitter and a parody Nunes Cow account. Attorney Biss didn’t bother to file an answer to Baker Botts motion to strike, which demanded attorney fees be paid for filing a frivolous lawsuit and retaliating against Baker Botts for their representation against Kesner in another related lawsuit. Instead two days after the missed deadline of July 13 he just filed a dismissal but without prejudice. This mean Kesner could try and file the complaint in another court–a move we have seen attorney Biss try over and over.

Additionally, Baker Botts told the California federal judge that Kesner’s dismissal isn’t going to stop them from asking for attorney fees under the anti-slaap laws in California. The next step is a hearing that was scheduled for July 27 where we could see if the Judge makes Kesner pay for his frivolous lawsuit.

Harvey Kesner is the long time securities lawyer for pump dump fraudster Barry C. Honig who was banned by the SEC last year and is allegedly still under criminal investigation. Attorney Kesner is currently battling a malpractice lawsuit filed by biopharma company MabVax. Baker Botts represents MabVax Therapeutics.

Original Story June 25, 2020
Penny stock lawyer Harvey Kesner has been sanctioned and fined after his lawyer, Steven S. Biss, disobeyed a New York federal judge’s order and tried to file a frivolous amended complaint accusing a big law lawyer of extortion and threats. The Judge lobed a one two punch and also granted the defendants, Baker Botts, motion to move the lawsuit filed in the Southern District of New York to Southern California where strong anti-slapp laws exist. Kesner is the long time lawyer for Barry C. Honig, who the SEC says mastermind a pump and dump stock fraud ring in over 40 stocks. Anti-Slapp laws will allow the defendants Kesner sued to ask the court to force him to pay their legal fees and impose penalties because the suit was allegedly filed as retaliation for Kesner being sued for fraud and malpractice.

Kesner’s main target of the litigation is Jonathan Shapiro, a lead litigation partner of Baker Botts. The lawsuit filed earlier this year for $35 million claims attorney Shapiro hatched a plan with a former client of Kesner’s, MabVax Therapeutics, to give evidence from an independent legal review of the investments made in the biotech company and subsequent disclosure in SEC corporate filings, to the Securities and Exchange Commission and the Dept of Justice that could lead to charges against attorney Kesner. The theme of Kesner’s lawsuit is that Kesner’s law firm was told they would have to pay Mabvax $9.6 million for Kesner’s alleged malpractice actions or the feds get the evidence. Evidence that includes Kesner allegedly advising Mabvax how to mislead a regulator in 2016 when they began questioning MabVax’s public filings and trading in the stock. Kesner was a named partner at New York based securities law firm Sichenzia Ross Ference. I was first to report Kesner was leaving the law firm, in the fall of 2018, on questionable grounds just weeks before his client, Barry Honig, was charged for securities fraud by the SEC.

A draft copy of the malpractice complaint, written by attorney Shapiro, obtained by this reporter, shows partners at SRF likely learned about Kesner’s alleged role in the Honig scheme just a month before the SEC filed their case against Honig. The suit was never filed in court. Instead a Boston-based law firm, Block & Leviton, filed a similar malpractice suit for MabVax a few weeks after Shapiro approached Kesner’s law firm for a settlement. And Baker Botts ended up suing all of Team Honig and others for their role in manipulating the stock price of MabVax and for trading as a group of undisclosed affiliates.

Baker Botts response to the complaint was swift, filing a motion to dismiss detailing how Kesner wasn’t telling the whole truth, after a trade publication for the legal profession, Law360, reported on the lawsuit glamorizing Kesner’s idea of being a victim of a RICO plot. Court filings show Kesner’s lawyer, Steven Biss, has a practice of saying outrageous things in lawsuit with the hope that the media will repeat them because his clients can’t be sued for libel or defamation for something their lawyers write in a lawsuit.

SDNY judge Hellerstein wrote in his decision to fine Kesner and move the case:

“After careful review of Defendants’ moving papers and Kesner’s Complaint, I hold that this case should be transferred to California. Without cataloguing what appear to be a number of glaring factual inaccuracies in the Complaint, or reviewing each and every one of
Defendants’ arguments for dismissal, I focus here solely on the need to transfer this case.”

Judge Hellerstein goes on to explain that Kesner repeatedly said in his complaint that Baker Botts sent a letter threatening to file a malpractice lawsuit without any intent of ever filing the suit but this just wasn’t true given a malpractice suit, that also accuses Kesner of fraud, was filed by another law firm a few weeks latter. As a result the judge order Kesner to pay at least a $1,000 fine for filing a frivolous motion and denied attorney Biss request to file an amended complaint.

A federal judge acknowledging that an untrue set of facts was written by attorney Steven Biss on behalf of his client, could be helpful for other defendants subject to attorney Biss’s pattern of vexatious litigation. Biss is currently suing multiple top media outlets like CNN, Washington Post, Hearst, McClatchy News for their coverage of U.S. Congressman Devin Nunes. Yesterday a federal judge ruled in Virginia that Nunes, through attorney Biss, can’t sue Twitter to reveal the identity of a parody account called Devin Nunes Cow that writes satire critical of the California congressman and others. Kate Irby was first to report on the outcome of the Twitter case. Additionally, other federal judges have warned attorney Biss that he could sanctioned. Sanctions for lawyers usually mean they will have to pay a fine but it can also mean suspension of a law license for not following their code of ethical practice.

Baker Botts wrote in their anti-slapp motion yesterday filed in Southern California that Kesner hasn’t even paid his court ordered fine yet.

Additionally, Biss is suing this reporter and Bill Alpert a senior reporter at Barron’s on behalf of Harvey Kesner. Alpert and I have never reported together. Like the Baker Botts case Kesner is trying to blame the journalist for ruining his career by reporting on litigation against him and his clients. The case was originally filed in South Florida where Kesner says he now lives. I have been representing myself Pro Se and worked with the Barron’s lawyer to get the case moved to SDNY. A judge ruled Florida was an improper venue for Kesner/Biss to file the case. Biss is joined in this litigation by a Florida lawyer Robert Buschel who says he is second chair. The duo are the same legal team that sued Baker Botts.

Attorney Buschel was also reprimanded by a the New York judge in my case when he tried to represent a wrong timeline for when Kesner left his law firm and how it related to the timing of the Barron’s article on his client.

Kesner’s goal in his litigation against me appears to try and use the courts to force me to reveal confidential government witnesses I interviewed in my reporting on his alleged role in the scheme tied to Barry Honig’s securities fraud. I stand by my reporting and have no intention of revealing sources even if it means I would be held in contempt. I am currently raising fund from readers to pay for my legal defense of this frivolous and harassing lawsuit. Remember Barry Honig also tried to sue me for reporting he was under SEC investigation in the fall of 2016 and then withdrew the lawsuit with prejudice in January 2018. That same year he was charged by the SEC for exactly what I reported he was doing. Evidence that has come out in the Honig ring investigation appears to show that while Honig was suing me he and Kesner knew Honig was under SEC investigation.

Additionally, the SEC has now come out and made public a transcript from one of their enforcement interviews in the investigation of the Honig securities fraud ring. As far back as 2014, the SEC was questioning another attorney Kesner worked with, Gregg Jaclin, about why Kesner was getting stock in a reverse merger deal involving PR Complete / YesDTC via an llc he owns called Paradox Capital. Jaclin was a partner in a securities law firm known for doing reverse merger deals called Anslow + Jaclin. Gregg Jaclin was sued for running a dirty shell company scheme by the SEC along with being charged with a felony in 2017 by the San Francisco DOJ for obstruction of justice in an SEC investigation. YesDTC and its CEO Joel Noel where charged criminally for running a pump and dump scheme. Jaclin has since made a plea deal in the criminal case and it’s unclear how much cooperation he is giving the DOJ in their case against Barry Honig and associates because his case is now sealed.

EDITOR’s NOTE: If you want to contribute to my defense fund in the frivolous lawsuit filed by Harvey Kesner please do so here.

The funds will go directly to the lo-bono attorney I will hire.

Aegis $5.1 million overnight raise for Digital Ally in Question: $DGLY

A small cap company that supplies bodycams to law enforcement, Digital Ally, saw its stock jump over 100% on Monday after protest riots in the U.S. extended over the weekend. The newly minted company gains got the attention of New York-based broker Aegis Capital Corp who convinced Digital Ally’s CEO, Stan Ross, to use its already filed shelf offering to sell an overnight discounted stock purchase agreement to retail investors. Aegis clients were rejoicing last night when their brokers, working under Anthony Lapadula, offered them the stock at only $1.65 after it had traded at a high of $2.53 on Monday. But people familiar with the transaction say there could be problems with an accurate account of the company’s stock float, which mean Aegis could have some problems with regulators in how the offering was sold.

Before the price hike the company had a float of around 13,000,000 shares and traded barely over a $1. But with Monday’s pop it caused institutional funds, with prior investments in the stock, to exercices their warrants, turn them into free trading stock, and cash out of their positions. This means there were more shares in the open market. Digital Ally had previously made SEC filings stating they were going to raise money with Roth Capital Partners and Lake Street. SEC rules say you can’t sell more than one third of the float off of a shelf offer in a 12 month period. And Digital Ally just sold an offering around $3 million a few months back.

Other broker dealers who had spoken with the company to raise money said they would need a ‘comfort letter’ from Digital Ally’s auditors or lawyers to confirm what the new share count is given so many warrants were exercised. That kind of proper due diligence check would take two to three days. But Stan Ross apparently found a firm, with a history of complaints against it’s broker dealer practices, to raise money off the hype. Additionally Aegis investment banking unit has made an exodus leaving it with only jr bankers. According to investors who bought the offering and insiders at Aegis, Anthony Lapadula was the lead I.B on last night’s deal. But Lapadula doesn’t have a series 79 license which is need to run an investment banking offer, according to Broker Check.

Last fall I was informed by company insiders that around half a dozen Aegis brokers had been called into their regulator, FINRA, for on the record interviews. Then in October I saw a SEC subpoena issued to a former Aegis broker who worked for Anthony Lapadula. It’s unclear which offering the SEC was focusing their questions on. A review in Broker Check shows Aegis has at least 34 regulator events. This includes complaints range from selling clients unsuitable offers to violating broker dealers rules regarding how and when they can sell an offering.

At press time Stan Ross and Anthony Lapadula did not return an email for comment. Aegis is run by Robert Eide, who goes by Bob, and founded the broker dealer in the mid-80s.

SEC gets Penny Stock bans for Florida men in Honig Pump & Dump scheme

The Securities and Exchange Commission has finalized the settlement deals for three members of Barry Honig’s pump and dump securities fraud scheme. John Stetson, Michael Brauser, and John O’Rourke III all agreed to penny stock bans at varying degrees and to not hold more than 4.99% in a penny stock. The SEC settlement is seen as forgiving because the monetary fines and disgorgement amount to just over one million dollars for each defendant. Their co-defendant, billionaire Philip Frost was ordered a $5 million fine and the SEC still has to finalize the amount the ring leader, Barry C. Honig, will pay. The settlements were presented to New York federal Judge Ramos on March 6, 2020 who approved them.

O’Rourke will pay a total of $1.153,326 of which $765,128 is for disgorgement of illegal profits from stock fraud. O’Rourke agreed to a lifetime penny stock ban

Brauser will pay a total of $1,175,768 of which $844,914.32 is for disgorgement. Brauser agreed to a lifetime ban but keeps to keep his position above 4.99% in Polarity TE ($PTE).

Stetson will pay a total of $1,154,149.28 of which $837,509.98 is for disgorgement. Stetson, who is believed to have began cooperating with the SEC last year, got only a ten year penny stock ban. Stetson’s agreement to settle with the regulator was signed October 29, 2019.

One of the funds that was run by Stetson but secretly held Barry Honig’s investment, HS Contrarian Investment, has agreed to pay injunctive relief but the dollar amount is not settled yet. As a result the SEC ask that the fund remain a defendant in the case.

The SEC settlement says the defendants have to sell positions in stocks they hold at least 5%. The penny stock ban means they can’t help raise money for stocks that trades below $5, market/promote the company, or serve on the board and consult for a penny stock. That means Michael Brauser’s monthly consulting gig at Red Violet ($RDVT) should end along with any stock position he has over 5%.

Only three stock were listed in the SEC case but the SEC said in their amended complaint some of the defendants, which included Brauser, executed the scheme in over 40 stocks. One of the stocks not named in the compliant was Riot Blockchain ($RIOT) who recently announced the SEC has told them the investigation into the company has been dropped.

I previously reported the SEC lost some of their claims against the remaining defendant, Rob Ladd, who is CEO of MGT Capital ($MGTI). His case is moving forward to trial.

There are no details disclosed about the status of the ongoing criminal case by the DOJ into Team Honig.

Final SEC Judgment as to Defendant Michael Brauser 3.6.20 by Teri Buhl on Scribd

Judge Dismisses Some SEC claims in Barry Honig Securities Fraud Case: $MGTI

A New York federal judge ruled this week that some of the charges against a defendant in the Barry Honig ring of pump and dump bad actors brought by the Securities and Exchange Commission will be dismissed. Judge Ramos ruled on February 25 that claims 3 and 4 of the SEC’s complaint relating to charging MGT Capital CEO, Robert Ladd, with fraud for failing to disclose he allegedly knew Barry Honig, Michael Brauser, John O’Rourke, John Stetson and friends were trading as an undisclosed affiliate group be dismissed. Ladd, the CEO of the publicly traded company, that once had cyber-security guru John McAfee as a partner, is the only remaining defendant that has not settled with the regulator.

A year and half after the SEC first brought the case, Ladd still claims this an overreach by the SEC and plans to fight the case to trial. The SEC is asking for Ladd to be banned as I public company CEO. I previously reported the SEC has said it plans to file another (it’s second) amended complaint involving Ladd and the judge has given them a deadline now of March 16th to have another go at it. The secondary liability claims involving Section 17(a) of the Exchange Act remain and so do the SEC’s fraud claim that Ladd allowed a misleading press release about John McAfee’s history with Intel to be published which encouraged main street investors to buy the stock because with McAfee involved the thought was MGT Capital could be one day be worth billions.

SEC claims for violations of the securities exchange act being thrown out at the motion to dismiss stage are rare. But Judge Ramos gave the SEC a back door by dismissing the 3rd and 4th claims without prejudiced. This means the SEC can try again with a new argument on why Ladd knew or should have know that team Honig was trading as a group and told his shareholders about it. But the SEC has only got two weeks to do it. And of course an amended complaint could mean the SEC adds new defendants.

Ironically, Judge Ramos also makes a point in his decision that an email Barry Honig wrote to Ladd back in 2015 saying he was investing as an individual in the private placement, after Ladd had made a vague comment asking how “your group” shares will be divided was something he didn’t believe Honig was telling the truth about. On a side note, that group of Honig’s also included Hudson Bay and Iroquois; who the SEC has not charged as defendants but keeps naming the individuals who run the funds in recent subpoenas.

The law firm that advised Honig and MGT Capital on team Honig’s investment (which got up to around owning 16% of MGT Capital) was led by none other than Sichenzia Ross Ference Kesner LLP. Honig was advised by Harvey Kesner and Ladd-MGT by another SRKF LLP lawyer. And they just happen to magically sign a waiver so that everyone would be on same team. This is the microcap law firm that I first reported removed Harvey Kesner as a named partner just weeks before the SEC brought their case and is the same firm fighting a malpractice suit because of attorney Harvey Kesner’s alleged bad actions relating to representation of MabVax. MabVax is another company in the SEC compliant that was pumped and then dumped by Team Honig.

It will be interesting to see what role the law firm (SRFK) played in advising MGT Capital that Team Honig wasn’t a group and shouldn’t be disclosed as such. And given all the discovery the SEC can get with recent subpoenas naming Kesner and a bunch of his former SRFK partners and associates there is good chance they will see other players role in this thing. What the SEC does with that information is another story.

Judge Ramos as also hinted in court filings that he is not going rule on the final amount Barry Honig will have to pay out in his securities fraud settlement with the SEC until all of the defendants cases have finished. So with Ladd’s case going toward trial that could mean Honig can hold on to his millions for a little while longer.

Additionally, we still haven’t seen the SF DOJ bring their parallel criminal case against the Honig defendants and it’s anyone guessing game at this point on who will be charged.

Private Text shows Michael Serruya could be part of Misleading Aphria SEC Filing: $APHA $GGB

A private text exchange between an Aphria deal lawyer and a member of the board calls into question the accuracy of an regulatory filing with the Securities and Exchange Commission about a bid cannabis company Green Growth Brands made to takeover Aphria. The bid was deemed as ‘hostile’ by Aphria’s board early this year and drew press attention after Aphria’s stock had lost at least half its market share from a short seller report, published the first week of December 2018, questioning the value paid by Aphria for foreign cannabis assets that significantly benefited insiders, like Michael Serruya and Andy Defrancesco, without disclosing the true nature of the transaction. Aphria, who at the time was run by CEO Vic Neufeld, called Serruya an independent director and put him on a special committee to investigate the legitimacy of the Green Growth offer. New information shows Serruya could have used his position to cause the company to make a false and misleading SEC filing.

On February 7, 2019 Tim Kiladze reported for The Globe and Mail that based on a recent regulatory filing, then law firm partner Curtis Cusinato of Canadian-based Stikeman Elliott LLP, had been first to come up with the merger idea and brokered a meeting between the company CEOs and a board member in September 2018. Canadian multi-millionaire Michael Serruya swore in an SEC filing, on February 5 2019, that the timeline of how the Green Growth Brands bid to buy Aphria began was true. But the day The Globe and Mail story came out attorney Curtis Cusinato texted Michael Serruya from a burner phone he used saying the SEC filing didn’t tell the true story and as a result complained The Globe and Mail headline and story were “just plain wrong”.

The Globe and Mail headline read: Aphria’s former legal advisor brokered first meeting with hostile bidder

According to a text message reviewed by this reporter sent on February 7th at 9:45 am attorney Cusinato texted Serruya saying:

“You need to call me – article and your circular is just plain wrong and before that meeting I had never met CEO and CFO they didn’t even know who I was. SE did not broker meeting.”

The message was also reviewed by a person who worked with Serruya and Defrancesco to confirm their belief it was Cusinato sending the message from his burner phone. SE = Stikeman Elliott LLP. Cusinato wanted Serruya to change or clarify the filing because he felt Serruya had used his name and the name of his law firm inaccurately. This reporter confirmed with people that interacted with Cusinato that he was handing out his burner phone number to people on Bay St after the short seller report came out in December because he thought if the government or regulators were going to investigate they wouldn’t try to tap an attorney’s phone because of attorney client privilege.

“Cusinato was absolutely acting panicked at this time”, according to a Bay St source.

Assuming Cusinato is telling the truth, why would Serruya have Aphria lie about how the “hostile bid’ idea happen. Why say a big law firm and its partner lawyer came up with the bid idea? Maybe it was to hid the fact that this was really a backroom plan by insiders who didn’t have the best interest of shareholders in mind?

The Globe and Mail was first to report that Stikeman Elliott and Aphria were going to part ways after the short seller report came out because it found out that Cusinato was also the brother-in-law of Andy Defrancesco who benefited from Aphria over-paying for the foreign assets. Sources on Bay St confirmed Cusinato was actually asked to leave by the firm but allowed to resign publicly to save face. By the time Cusinato had sent the February 7th text he was no longer working for Stikeman. Then on March 6th a smaller Canadian law firm, Bennett Jones, announced they had hired Cusinato as a partner.

Aphria trades on the Canadian exchange TSX and U.S. exchange NYSE. As a result anyone who signs their SEC filings could be subject to SEC enforcement. The Securities and Exchange Act rules say you can not file misleading or untruthful public filings with the Commission especially if it is about a material event like a buy out offer. Serruya’s action could be a technical violation. Additionally it brings into question Serruya’s real independence. Regulators could examine if Serruya and Aphria made misleading statements about his independence that influenced investors decision to buy or sell the stock or vote for the Green Growth Brands bid.

I have previously reported that it was Serruya working with Aphria investor Andy Defrancesco in a backroom deal to engineer the Green Growth offer in a move to try and keep their secret control of the company, based on their own private text messages.

An additional private social media chat message, reviewed by this reporter, says that in early February Green Growth Brands director Adam Arviv was complaining to Andy Defrancesco about spending two hours on the phone with Serruya negotiating the Green Growth deal. It was odd that Arviv wasn’t complaining about negotiation with the Aphria CEO. The private messages are not totally clear what aspect of the deal Arviv was upset about but he did use threatening language when speaking with Defrancesco. The private chat is another example of how people involved in the Green Growth bid thought Serruya was in charge of the “not really hostile” bid. Arviv is the son of Harold Arviv who was accused blowing up his own disco club in the 80’s to get insurance money and also allegedly had ties to the mob. Harold Arviv went to jail in the late 80s.

Cusinato and his prior law firm Stikeman Elliott were contacted about the contents of the text message for comment and did not respond to emails. Michael Serruya has never responded to an email or phone call requesting comment or an interview.

Aphria Board Member Mike Serruya

Editor Note: Aphria’s descriptive timeline of the Green Growth Brands bid starts on page 22 of this SEC filing. Serruya’s signature swearing to the truth of the filing is on page 38. Aphria’s current CEO Irwin Simon also signed the statement.